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(Alliance News) - Stocks in London are set to open lower on Thursday after the World Health Organisation reported a spike in coronavirus infections, and the US central bank raised concerns that some businesses may not survive Covid-19's long-lasting effects.
In early UK company news, easyJet plans to return to the skies on June 15, Whitbread announced a fully underwritten rights issue to raise GBP1 billion, and AstraZeneca has secured manufacturing capacity for one billion doses of the University of Oxford's potential Covid-19 vaccine.
IG says futures indicate the FTSE 100 index of large-caps to open 38.66 points lower at 6,028.50 on Thursday. The FTSE 100 index closed up 64.94 points, or 1.1%, at 6,067.16 on Wednesday.
The World Health Organization has reported the largest single-day increase in coronavirus cases, as US President Donald Trump proposed hosting world leaders for the annual G7 summit as a sign of "normalization".
Trump, who is seeking to revive the battered US economy and his political fortunes ahead of the November election, again lashed out again at China, saying its "incompetence" was responsible for "this mass Worldwide killing".
The WHO, another frequent Trump target, said that 106,662 virus cases were reported to the UN agency on Tuesday – the most in a single day since the outbreak erupted in the Chinese city of Wuhan in December.
As the global death toll topped 325,000 and the number of cases neared five million, WHO chief Tedros Adhanom Ghebreyesus said he was "very concerned" about the situation in low- and middle-income nations.
David Madden at CMC Markets noted that an easing of lockdowns is believed to be the reason for the surge in cases.
"Stocks is Asia are a little in the red, and European markets are expected to open lower," he said. "France and Germany have public holidays today, so volatility is likely to be low in the eurozone."
Financial markets in France and Germany will remain open on Thursday, while Zurich will be closed for the Ascension Day holiday.
In early UK company news, easyJet said it will resume flights in mid-June with new biosecurity measures in place.
A small number of flights will restart on June 15 on routes where the airline thinks there is "sufficient customer demand to support profitable flying". The initial schedule will comprise mainly domestic flying in the UK and France.
easyJet will require customers, cabin and ground crew to wear masks, and easyJet will carrying out "enhanced" cleaning of aircraft.
"I am really pleased that we will be returning to flying in the middle of June. These are small and carefully planned steps that we are taking to gradually resume operations. We will continue to closely monitor the situation across Europe so that when more restrictions are lifted the schedule will continue to build over time to match demand," said Chief Executive Johan Lundgren.
Whitbread said it delivered a "resilient" full-year result as it announced plans to raise GBP1 billion via a fully underwritten rights issue.
For the year to February 27, the hospitality firm's revenue rose 1.1% to GBP2.07 billion and pretax profit was up 28% to GBP280 million. This increase in profit was largely due to separation costs incurred in the prior year from the disposal of the Costa coffee-shop business.
Adjusted pretax profit fell by 8.2% to GBP358 million due to a weaker UK travel market, high industry-wide inflation and the start-up of German operations, the Premier Inn hotel chain owner said.
"Whitbread delivered a resilient financial performance in FY20 in line with expectations, against a backdrop of low UK business and consumer confidence which particularly impacted the regional hotel market. The commercial initiatives we implemented during H1 helped drive a particularly strong end to the year, when we were trading ahead of the market and achieving very strong guest scores," said Chief Executive Alison Brittain.
She continued: "However, the period after the year-end has been dominated by the impact of the rapidly evolving Covid-19 pandemic. In response, the business took rapid and decisive action to protect our teams and our guests, and to secure our business to ensure that we will be in the best possible position to rebound strongly."
Whitbread said its UK hotels are ready to open when the government advises, with the company's internal scenario assuming that hotels are closed, or at low levels of occupancy, until September. German hotels reopened on May 11.
The FTSE 100 constituent said it had "significant" liquidity entering the new financial year and Covid-19 crisis, but it now intends to raise GBP1.01 billion via a fully underwritten rights issue to provide a platform for future growth and investment.
"The purpose of the rights issue is to ensure that Whitbread emerges from the Covid-19 pandemic in the strongest possible position to take advantage of its long-term structural growth opportunities and win market share in both the UK and Germany," said Whitbread.
AstraZeneca said it is collaborating with a number of countries and organisations to make the University of Oxford's Covid-19 vaccine widely accessible, having secured its first commitments.
The pharmaceutical company has concluded the first agreements to supply at least 400 million doses and has secured total manufacturing capacity for one billion doses so far and will begin first deliveries in September 2020.
ChAdOx1 nCoV-19, now known as AZD1222, was developed by Oxford University's Jenner Institute. AstraZeneca has now finalised its licence agreement with Oxford University for the recombinant adenovirus vaccine.
AstraZeneca has received support of more than USD1 billion from the US Biomedical Advanced Research & Development Authority for the development, production and delivery of the vaccine, starting in the autumn.
"A Phase I/II clinical trial of AZD1222 began last month to assess safety, immunogenicity and efficacy in over 1,000 healthy volunteers aged 18 to 55 years across several trial centres in southern England," AstraZeneca said. "Data from the trial is expected shortly which, if positive, would lead to late-stage trials in a number of countries. AstraZeneca recognises that the vaccine may not work but is committed to progressing the clinical program with speed and scaling up manufacturing at risk."
Aviva has estimated it will pay GBP160 million in Covid-19 claims in its general insurance businesses.
The insurer said it made a strong start to the year, with life new business sales up 28% to GBP12.3 billion and general insurance net written premiums up 3% to GBP2.4 billion.
Aviva said it is still in the early stages of claims development regarding Covid-19, and so the impact on the firm still has a "high level" of uncertainty. However, based on analysis as at April 30, Aviva estimates Covid-19 related claims in its general insurance businesses are GBP160 million net of reinsurance.
This is based on estimated claims in business interruption insurance, other commercial lines and travel insurance, Aviva said.
"The economic outlook remains uncertain and will affect our business, however the strength of our capital and liquidity means we are well positioned to manage this crisis and continue to support our customers," said Chief Executive Maurice Tulloch.
Pets at Home said "exceptional" fourth quarter demand helped to boost annual profit ahead of expectations. However, Covid-19 has depressed activity at the start of the new financial year.
Like-for-like revenue growth was 9.0% in the financial year to March 26, with revenue up 10% on a reported basis to GBP1.06 billion, exceeding the GBP1 billion mark for the first time. Pretax profit surged to GBP85.9 million, up from GBP49.6 million the year before, the pets product retailer said.
However, "nearly all" of the exceptional demand witnessed in the closing weeks of the final quarter has unwound during the first quarter of the current year which, combined with social distancing across its operations and restrictions on the sale of pet products and services deemed non-essential, has temporarily depressed normal levels of group turnover, Pets At Home said.
Online sales have been good, but have been unable to mitigate the reduced level of in-store sales, it said.
"Accordingly, we anticipate H1 FY21 group pretax profit, including both the one-off benefit from the business rates holiday, which will be utilised to partially mitigate the estimated financial impact of Covid-19 this year, as well as additional operating costs related to social distancing, to be materially below the prior year," said Pets at Home.
The retailer added that it does not feel prudent to provide full-year guidance at this time.
In the US on Wednesday, Wall Street ended higher, with the Dow Jones Industrial Average up 1.5%, the S&P 500 up 1.7% and Nasdaq Composite up 2.1%.
Released on Wednesday, minutes from the US Federal Reserve's latest policy meeting showed the central bank thinks some damage from Covid-19 may persist especially if consumers remain reluctant to return to normal activities.
Officials "expressed concerns that a large number of small businesses may not be able to endure a shock that had long-lasting financial effects."
And they worried that "even after social-distancing requirements were eased, some business models may no longer be economically viable", especially if consumers decide to "avoid participating in particular forms of economic activity".
With over 90,000 deaths from the virus and data showing more than 30 million jobs destroyed at least temporarily, the central bankers said the US economy will see an "unprecedented" decline in the second quarter as the unemployment rate rises to the highest in the post-World War II period.
Fed Chair Jerome Powell said this week that GDP could "easily" contract 20-30%, while unemployment could spike to 25%.
In Asia on Thursday, the Japanese Nikkei 225 index ended down 0.2%. In China, the Shanghai Composite is down 0.5%, while the Hang Seng index in Hong Kong is down 0.6%. Â
The value of outbound shipments from Japan plunged 22% year on year to JPY5.2 trillion in April amid the economic fallout from the coronavirus pandemic, a government report showed.
The decline was the steepest in 10 years, dealing a severe blow to Japan's export-oriented economy. The reading represented the 17th consecutive monthly fall, according to a preliminary report issued by the Finance Ministry.
Shipments to China, Japan's largest trading partner, fell 4.1% year on year to JPY1.2 trillion, while imports jumped 12% to JPY1.7 trillion, the ministry said.
The economic events calendar on Thursday has manufacturing and services PMI readings from Germany, the eurozone, UK and the US at 0830 BST, 0900 BST, 0930 BST and 1445 BST respectively. US jobless claims are out at 1330 BST.
Ahead of the data, sterling was quoted at USD1.2189 early Thursday, lower than USD1.2266 at the London equities close on Wednesday.
The euro traded at USD1.0957 early Thursday, down against USD1.0992 late Wednesday. Against the yen, the dollar was quoted at JPY107.73 versus JPY107.43.
Gold was quoted at USD1,737.39 an ounce early Thursday, lower than USD1,747.30 on Wednesday. Brent oil was trading at USD36.38 a barrel early Thursday, up from USD35.52 late Wednesday.
By Lucy Heming; lucyheming@alliancenews.com
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